Friday, January 30, 2015

Watch the Car Sales

I ate dinner last night in the company of Lithia Auto Dealers employee. Among other things, I asked him about that program of not negotiating on the sticker price that I had heard of a couple years ago. He said that didn't work out. I asked him what made Lithia so profitable in the auto industry. He also didn't know why they might be. This man did not work in management, but I was interested in the culture of Lithia and how much a person in sales would know about the corporate situation. We were in Medford, in S. Oregon. As I left town I noticed brand new Lithia facilities, some so new and shiny they hadn't moved in the vehicles to sell.

Today on CNBC there was an interview with a man, Ivan, who is a retired Air Force engineer. He related the story of going to buy a car, I didn't hear where, and the dealership offered him a zero interest loan on the car and $1000 cash back. They needed him to buy the car so much that they offered him a free loan, and paid him to take the loan.

I know, the car is probably overpriced. But that would mean the price of the car needs to come down to be affordable without an interest free loan and the $1000 bribe.

I recall hearing a couple years back that we may be seeing a dangerous rise in CDOs in the bundling of auto loans. I found this article.

I glanced at the Lithia Auto Dealer stock (LAD). The stock topped back in June of last year, has rebounded on lower volume. Not a particularly inspiring chart. It is reminiscent of the housing stocks about eight years ago.

Be careful out there.

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